Land appraisals under scrutiny

The Treasury Department may raise the median price of land used in evaluating the local maintenance tax with the aim of boosting local administrations' coffers.

However, the Bangkok Metropolitan Administration (BMA) is still concerned such an increase will burden people subject to local maintenance tax payments, said Naris Chaiyasoot, director-general of the Treasury Department.

The local maintenance tax rate is based on the median price from appraisals between 1978 and 1981, but current market prices, particularly in Bangkok, have increased significantly, he said, adding that a low-base results in less local tax revenue.

The current rates of local maintenance tax are relatively low at 0.5% of the median price for land priced below 30,000 baht a rai, and 0.25% for that priced over 30,000 baht per rai. Landlords who own less than five rai are exempt.

He said local governments collect little tax income as 90% of Thais own less than one rai of land each, and it is a regressive tax.

An unequal tax structure, where landowners with pricier land pay lower tax rates than those with lower priced land, has compelled the Finance Ministry to push for a land and building tax to replace the current local maintenance tax and property tax.

A draft land and building tax bill proposed when the Democrat Party was in power stipulated a maximum 0.5% tax of the appraised value for property used for commercial purposes, up to 0.1% for residences, and a ceiling of 0.05% for land used for agricultural purposes.

Such a bill would allow the Treasury Department to use its appraisal prices as a tax base, in addition to using them for calculation of ownership transfer fees and personal income tax from property transactions.  The bill would require clarity in land and building prices of each plot, he said, as appraisal prices are mainly done by zone rather than each land plot.

Only 7 million land plots, largely located in Bangkok and key provinces, have appraisal prices for separate plots. The Treasury Department has the capability to arrange such prices for only 2 million plots a year.

The department is conducting appraisal prices by plot in Khon Kaen and Udon Thani provinces.

Wason Khongchantr, managing director of property consultant Modern Property Consultants Co, urged the Treasury Department to accelerate land price appraisal by plot as it could create benefits beyond updating the median price, which can only boost local administrations' income. He said appraising land value by plot, which is more accurate and can better reflect the actual market value than doing it by zone, can be used to set a land value index in each province, which would be applicable for the next appraisal.

For example, when an economic crisis or nationwide flood occurs, the government could maintain the appraised land price for a number of years to help people with living expenses, said Mr Wason. In some locations where land speculation becomes rampant, local administrations could raise appraisal values to prevent a bubble, he said.

"It will create a fair land value for every party. This will help speed up the country’s infrastructure development as land expropriation will be faster,” he said. "The bill would also make tax collection easier.”

There are only 200 staff at the department responsible for land appraisals, with a capacity of 30,000 plots per head per year.

"Recently a plot on Sukhumvit Road in the Nana area was bought for 1.8 million baht per square wah but the appraised value was below 1 million," he said.

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